Weekend gap risk

Forex trades 24 hours a day, five days a week — not seven. The market closes around Friday evening and reopens Sunday evening (broadly 22:00 UTC Friday to 22:00 UTC Sunday, with the exact hours set by your broker). The world does not stop during those 48 hours, but your ability to trade does.

News over the weekend — an election result, a central bank statement, a geopolitical event — changes what the market thinks a currency is worth. But with no trading, price cannot travel there gradually. It simply reopens at the new level, leaving an empty space on the chart between Friday's close and Sunday's open. That empty space is a gap.

A stop loss is an instruction to close at the best available price once your level is reached. During active trading, that price is normally very close to your level. Over a gap there is no available price in between — so the order fills at the first price that exists on Sunday, which can be well beyond your stop.

• Many traders simply close everything before the Friday close. That is the only way to have zero gap exposure, and it costs nothing but a few open trades.
• If you do hold over the weekend, hold smaller. Halving the position halves the size of a gap loss.
• Check the weekend's scheduled events before Friday's close — elections, referendums, central bank meetings and OPEC decisions are known in advance.
• Be more cautious during uncertain conditions: geopolitical tension, a banking scare, or a market already moving on headlines.
• Expect a wider spread at the Sunday open too. Placing market orders in the first minutes of the week is expensive.
• Gaps cut both ways — a gap in your favour is equally possible. That does not make it a strategy; it makes it a coin flip on an outcome you cannot manage.

Day traders sidestep this entirely by closing everything before the day ends. Swing and position traders accept gap risk deliberately, and compensate by using smaller positions than their stop distance alone would suggest.